Local machine rolls 200 cigarettes in 8 minutes

Low-cost 'smokes' avoid tax

BY KRIS TURNERBLADE BUSINESS WRITER

Sales and marketing director Chris Markho, left, shows customer Justin Lusher how to prepare a machine to make cigarettes at the RYO Filling Station at Tobacco Haven on Spring Valley Drive in Holland.THE BLADE/LISA DUTTONEnlarge
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The empty cigarette casings loaded into the front of the RYO Filling Station at Tobacco Haven moved through the machine like a tiny assembly line on Wednesday.

Mild tobacco was siphoned from a bin on top of the ATM-like machine and stuffed into the white tubes, which rotated on a cylinder resembling a miniature Gatling gun.

In a matter of eight minutes, 200 cigarettes were produced and packed into a see-through plastic bag.

The roll-your-own machine -- a cause of concern for federal and state legislators because it falls into a tax loophole -- is a boon for Sam Markho, who owns Tobacco Haven on Spring Valley Drive in Holland. Mr. Markho said the technology is so promising that he plans to operate up to eight shops in the Toledo area. "It produces the same product as a name brand but saves the customer money," said Mr. Markho, who also has stores in Maumee and Oregon.

A box of "smokes" at the store retails for $21.99, which is as much as $40 less than a carton of cigarettes at a retail store. The business calls the cigarettes "smokes" to comply with the law, Mr. Markho said. Smoking is not allowed inside the store, and employees check IDs to make sure customers are old enough to buy tobacco.

The store offers a choice of tobacco brands and flavors, as well as a variety of cigarette tubes. Although customers can leave the store with as many "smokes" as they want, they're essentially buying tax-free cigarettes. The loose tobacco leaf used for roll-your-own cigarettes is considered produce and thus not subject to federal taxes. They also do not incur Ohio's cigarette tax.

Two pieces of legislation working their way through Congress aim to add these machine-made cigarettes to a list of federal taxable tobacco products and capture the revenues associated with them.

The rolling machine emits a complete cigarette. A box of "smokes" from the store sells for $21.99 -- as much as $40 less than a carton of cigarettes at a retail shop. The loose tobacco leaf used for the roll-your-own cigarettes is considered produce and thus not subject to federal tax. But Legislation now working its way through Congress could change that.THE BLADE/LISA DUTTONEnlarge
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Rep. Diane Black (R., Tenn.) is sponsoring an amendment to the federal tax code that would expand it to include "any person who for commercial purposes makes available for consumer use a machine capable of producing tobacco products." The bill was referred to the House Committee on Ways and Means on March 5.

The other piece of legislation would amend the Secure Rural Schools and Community Self-Determination Act with similar language. It is sponsored by Sen. Max Baucus (D., Mont.) and was passed by the Senate on March 8.

At least some of the country's biggest tobacco companies are lobbying for the legislation, including Altria Group Inc., which is the parent company of Philip Morris USA, the country's largest cigarette manufacturer.

The American Cancer Society opposes all tobacco use because of the serious health risks associated with it, and supports a federal tax on roll-your-own products, said Wendy Simpkins, a spokesman for the group's east-central division.

Lucas County Chief of Staff Bridgette Kabat said she was unaware of the machines and said the county most likely would not possess the authority to regulate them.

Although Mr. Markho is not opposed to a slight tax on the "smokes," he fears he would lose business if they are taxed at the same rate as name-brand cigarettes.

Chris Markho, director of sales and marketing for Tobacco Haven, wants legislators to look at alternative ways of taxing the product instead of lumping roll-your-own cigarettes in with ready-made ones. "What we are hoping is they create a new tax and put it in a whole new tax bracket," he said.

The Dayton Daily News contributed to this report.

Contact Kris Turner at: kturner@theblade.com or 419-724-6103.

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